Otago Standards Committee v Greg Roderick Stewart
 NZLCDT 28
NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL
Judge D F Clarkson
MEMBERS OF TRIBUNAL
Ms F Freeman
Mr C Lucas
Mr G McKenzie
Mr W Smith
 NZLCDT 28 LCDT 014/16
UNDER the Lawyers and Conveyancers Act 2006
Mr J Shaw for the Standards Committee
Ms B Webster for the Practitioner
Penalty decision in respect of a breach of r 5.5.1 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules2008 (CCCR) (services other than regulated services … must be associated with the provision of regulated services …) — the business in question was banking services — such conduct had not been considered by the Tribunal before — the practitioner became involved with a company which provided advice and financial services to overseas clients — the company'websitepromoted the practitioner as providing banking services through his solicitor'trust account — the engagement letter referred to fee structures which related to the provision of banking services rather than legal services — the practitioner pleaded guilty and both counsel agreed on a 12 month suspension — whether the practitioner had breached r 5.5 by providing stand-alone banking services — if so, whether a 12 month suspensions was sufficient from a deterrence perspective.
The issue was: whether the practitioner had breached r 5.5 by providing stand-alone banking services; if so, whether a 12 month suspensions was sufficient from a deterrence perspective.
Held: The seriousness of this misconduct was aggravated by the nature of the services provided, namely banking services. That was because of the privileged nature of a trust account, and the manner it was promoted as a “selling point” by the ETIL website material.
During the time S operated in this manner, he was entirely reliant on ETIL to carry out the due diligence in respect of the clients referred to him. S had complete confidence in O and thus his company. In terms of his role as a director of ETIL, S had expressed concerns that at no time was he asked to attend a director'meeting, did not ever see annual accounts, nor was asked to sign any minutes. He indicated his resignation was prompted by his wish to cooperate fully with the inspector, who was clearly expressing concerns about the banking business.
The risks of a practitioner allowing his trust account to be utilised in the manner that had occurred here, particularly via the intermediary of a company such as ETIL in which the lawyer had no day to day management or even more distant governance role, were obvious. This was very serious conduct indeed.
In respect of Charge 1, the length of time of the irregularities, namely three years was an aggravating feature, in addition to the inherent seriousness of the conduct itself. In addition, it was acknowledged by S that the filing of 30 incorrect certificates was an aggravating feature.
The mitigating circumstances included that S cooperated fully with the investigator and took steps to remedy errors, he immediately acknowledged his errors and took responsibility for them. Personal mitigating factors were that S had been a practitioner for 32 years, and prior this had an unblemished disciplinary record. He deserved considerable credit for this.
S'decision to remove himself from legal practice voluntarily also demonstrated insight into his offending, and his lack of judgment in relation to the banking matters. His disappointment in himself and contrition a letting down his own professional standards, and his profession as a whole was evident from his presentation at the hearing.
The circumstances of this case, coupled with the other trust account offending, could well have justified a suspension of two years. In some cases conducting banking services might well justify strike-off. It would be a matter of assessment in each case.
While there was no need for specific deterrence for this practitioner, there ought to be an element of general deterrence in the fixing of a penalty for the banking services charge. The privileged status of the solicitors' trust account justified a firm response where there was a breach.
There was concern that S allowed himself to become engaged in the business of ETIL without further scrutiny and without ongoing due diligence in his position. He was unwise to accept a directorship without insisting on regular meetings and being aware if there were properly administered resolutions.
But for the strong mitigatory features in this matter, a penalty of two years suspension would have been imposed. In these circumstances a suspension of 18 months from the date of the hearing was appropriate.
Practitioner suspended for 18 months. Censure given. Costs in favour of the Standards Committee in the amount of $16,000m Tribunal'costs in the sum of $2,488.00.
PENALTY DECISION OF THE TRIBUNAL
This penalty decision is the first in which the Tribunal has considered a breach of Rule 5.5.1 — that is the rule that prevents a lawyer operating a business which provides other services to a client, unconnected with regulated services. In this case the situation is particularly serious because the business in question was banking services.
To his credit, Mr Stewart was fully cooperative from the inspection stage and throughout the disciplinary process. He has pleaded guilty to the two (amended) charges and taken responsibility for his actions. He has voluntarily stepped aside from practice.
Because of the implications of the “banking services” charge, the Tribunal was cautious in approaching the agreed penalty schedule which had been negotiated by the parties. We requested that we receive full submissions on penalty.
As submitted by Ms Webster, in order to determine penalty the following factors are considered:
- The seriousness of the conduct. 2. Aggravating features. 3. Mitigating features. 4. Relevant penalty decisions. 5. The need for specific or general deterrence. 6. The need for protection of the public. In addition we consider there must be a further assessment: 7. The overall fitness of the practitioner.
Taking all of those features into account, we determine what will be a proportionate response to this conduct, which will maintain the public'confidence in the legal profession, according to objects of the Act.
The charges, as amended are set out in Appendix 1 to this decision. The practitioner has admitted Charge 1, which involved the management of his trust account. The practitioner conceded that he had been negligent to the level set out in s 241(c) of the Act 1 which states:
“… has been guilty of negligence or incompetence in his or her professional capacity, and that the negligence or incompetence has been of such a degree or so frequent as to reflect on his or her fitness to practise or as to bring his or her profession into disrepute …”
The background to the charges is as follows: Mr Stewart, who has been a lawyer for some 32 years, has practiced on his own account, with a trust account since February 2009. During a routine inspection on behalf of the Law Society in January and February 2014, a number of irregularities were noted in Mr Stewart'trust account record keeping. As set out in Mr Shaw'submissions, these fell into four categories:
• Failure to keep adequate records.
• Client balances overdrawn.
• Failure to reconcile trust bank accounts with trust ledger.
• Incorrectly certifying compliance with the Act and Regulations.
Mr Stewart'trust account problems began when he transitioned from a manual ledger system to a computer based system. He received little training in the computer package and because he resided in a small provincial town he seemed unable to obtain ready assistance with his difficulties.
The irregularities extended over a three-year period, and each time Mr Stewart was required to certify to the New Zealand Law Society (“NZLS”) that his trust account was properly reconciled, he did so, telling himself that the residual errors which he was carrying forward each month “did not negatively impact on his clients, and that his manual system for correction complied with Law Society requirements”.
By his guilty plea he acknowledges that this was not the case. After this was pointed out by the inspector, Mr Stewart took steps to obtain further training and to put right all of the errors that had been found by the inspector. He was completely open with the inspector and on the inspector'third visit to check compliance, there were no remaining concerns.
In his submissions Mr Shaw draws our attention to the following features, which he says underscore the seriousness of this conduct:
“(a) The extended period of non-compliance and inadequate record keeping (three years).
(b) The fact that client balances were repeatedly overdrawn with insufficient funds in the firm'float to cover the debit balance.
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